In the late 1990s, after a public backlash against the use of civil asset forfeiture to take money and property from innocent people, seven states passed laws assigning all proceeds from such forfeitures to public schools or the general fund instead of police departments and prosecutors’ offices. The idea was to reduce the incentive to seize assets from innocent owners and to target people based on the value of their property instead of the seriousness of their crimes.

In Indiana, the state’s original constitution called for criminal forfeitures to be earmarked for a school fund, and recent attorneys general have applied that provision to civil forfeiture as well. But thanks to various evasive maneuvers, very little forfeiture money actually ends up in the fund.

One way around the rule is “adoption,” a process in which police departments call the feds when they’re about to close a case that promises a big forfeiture payoff. The investigation then becomes a federal case, governed by federal law. The feds collect the proceeds and send as much as 80 percent back to the local cops. The school fund gets nothing, and the perverse incentives remain in place.

Another trick is to negotiate a settlement with the property owner, perhaps by letting him keep some of his allegedly ill-gotten gains. Settlements aren’t considered forfeitures and therefore aren’t governed by the funding earmark.

Many Indiana counties contract out their civil forfeiture cases to private attorneys, who get to keep a hefty commission of 25 percent or more. This arrangement creates new perverse incentives, since the attorneys choose and help prosecute cases from which they gain financially.

Counties also may deduct police and prosecution costs related to a forfeiture case from the proceeds before sending the remainder to the school fund. Judges do not seem to scrutinize the cost estimates very closely, allowing law enforcement agencies to reap profits by highballing their numbers.

Given all of these ways around the law, how much forfeiture money actually flows into Indiana’s school fund? Almost none. In July the Indianapolis attorney Paul Ogden reported on his blog, Ogden on Politics, that “millions of dollars of civil forfeiture funds are being kept by law enforcement agencies, prosecutor’s offices, and private attorneys hired by prosecutors, rather than turned over to the State for education.” His conclusion was echoed a month later in a front-page Indianapolis Star story. According to Ogden, just five of Indiana’s 92 counties paid any forfeiture money into the school fund during the last two years. Three of those made just one payment, and one paid just twice. Only one county could arguably be seen as complying with the law: Wayne County made 18 payments, totaling $38,836.

The total amount of forfeiture money paid into the account from all 92 Indiana counties during the two-year period was just $95,510. To put that figure into perspective, Ogden notes that Christopher Gambill, a private attorney who handles civil forfeiture cases for three Indiana counties, made $113,146 in contingency fees from a single forfeiture case.

Forfeiture experts Steven Kessler and David Smith argue that contracting forfeiture out to private attorneys violates the Constitution’s Due Process Clause because unelected people are reaping a direct financial benefit from public policy decisions they make. But according to Mark Rutherford, chairman of the Indiana Public Defender Commission, “It’s just sort of accepted here that this is the way things are. There are attorneys who have amassed fortunes off of these cases.”

As Ogden notes, one of those attorneys is the celebrity lawyer and talk show host Greg Garrison, whose law firm handles forfeiture cases for Marion County, where Indianapolis is located. Marion County didn’t pay a penny of forfeiture proceeds into the state school fund in the last two years.

“It is not entirely clear where all the money is going,” Ogden writes, “or where the breakdown in the system is that has left only a trickle of money going into the common school fund. Possibly it could be that prosecutors or their hired private counsel aren’t closely analyzing law enforcement costs and are simply assuming that on every forfeiture case law enforcement costs and attorney’s fees consume the entire amount of the proceeds seized.” He also hypothesizes that “judges aren’t properly making the determination as to how much the law enforcement costs.”

Ogden is being charitable. It’s clear that prosecutors and judges in Indiana know they’re gaming the system.

In an earlier issue of reason (see “The Forfeiture Racket,” February), I looked at the case of Anthony Smelley, who had $17,500 in cash taken from him during a traffic stop in Putnam County, Indiana. Smelley was never charged with a crime, but it took well over a year and several court proceedings for him to get his money back. After the article was published, Gambill, the private attorney who does forfeiture work in Indiana, told me he thought the judge in the case, Matthew Headley, might be biased because Headley had once unsuccessfully sought $5,000 from the county forfeiture fund to purchase new audio-visual equipment for his courtroom.

Although Headley admitted asking for the money, he denied that getting turned down affected the way he presided over forfeiture cases. But the issue of whether Headley was biased obscures the larger point: In a state where all proceeds from forfeiture cases are supposed to go to a school fund, why would Headley have assumed there would be $5,000 in forfeiture proceeds available to upgrade his courtroom? The obvious answer is that judges and prosecutors, at least in some parts of Indiana, know the school fund requirement is routinely disregarded.

Civil asset forfeiture is an unjust practice under any circumstances. It is an invitation to corruption, offering a way for the government to get its hands on someone’s property under a lower standard of proof than it must meet to convict someone. What’s happening in Indiana, where virtually the entire legal system is ignoring the spirit if not the letter of state law, only confirms that once you give the government a license to steal, it’s very difficult to wrest it back.